Oil companies could shift over a fifth of spending to renewables by 2035

More than a fifth of investment by the largest oil and gas companies could be in wind and solar energy technologies by 2035, according research group Wood Mackenzie.

Wood Mackenzie’s new report, Could renewables be the Majors’ next big thing?, states that slowing demand for oil and the projected rapid growth in the renewable energy sector presents both a threat and an opportunity for oil giants, including BP, Shell and Total.

Valentina Kretzschmar, Director of Research at Wood Mackenzie, said: “The momentum behind these [renewable] technologies is unstoppable now.”

She went on to say: “They [the oil companies] are recognising it is a megatrend; it’s not a fad, it’s not going away. There is definitely a risk to their core business.”

Major energy companies will need to devote over $350 billion on wind and solar power by 2035 in order to take a market share comparable to the 12 per cent they have in oil and gas, Wood Mackenzie said.

The research group acknowledged that a number of oil and gas companies have already realised the existential risk threat that renewables pose, and have subsequently begun to diversify.

Norwegian energy company Statoil is to deploy the world’s first floating offshore windfarm later this year, while the gas and renewable power division of France’s Total now employs 13,000 people and accounted for $4.7 billion of capital expenditure last year.

Wood Mackenzie projects that demand for renewables will grow faster than oil over the next twenty years.

Specifically, the analysts forecasted annual growth rates of 11 per cent for solar and 6 per cent for wind, compared with 0.5 per cent for oil.

Kretzschmar stated that oil and gas companies in Europe were leading the U.S. in terms of renewable energy adoption, largely due to the lower costs of oil and gas production in the U.S.

If companies delay diversifying their portfolios, they risk being left behind and “at a structural disadvantage” if wind and solar grow even more rapidly than predicted, the analysts said.

"Wind and solar are increasingly important strategic growth themes that the majors cannot afford to ignore as they plan for 2035 and beyond," Wood Mackenzie said. "Companies are only just starting to sow the seeds for the radical changes that lie ahead."

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